Forecasters tip sunnier times for US ad industry

The increasing indications that the US advertising industry's long recession may be ending were bolstered by upbeat predictions for 2004 from two leading industry forecasters.

The forecasts, issued on Monday, are the most recent in a host of predictions for robust growth signalling a possible end to the recession that began after the dotcom bubble burst in late 2000.

The industry downturn has been one of its worst on record, including the first decline in US advertising spending in a decade and the largest one-year domestic decline since the Depression.

The forecasters, Robert Coen of Universal McCann and John Perriss of ZenithOptimedia, presented their predictions for healthy gains at the opening session of the annual UBS Media Week Conference in Manhattan.

While their forecasts are always closely watched, they have taken on added meaning as the advertising industry stumbles through a third consecutive year of sub-standard results.

Mr Coen increased his forecast for domestic ad-spending growth for next year to $US266.4 billion from a projection of $US263.8 billion in June.

His estimated final figure for 2003 is $US249.2 billion ($337 billion), an increase of 5.2 per cent from 2002 - and also higher than the record set during the boom of 2000, $US247.5 billion.

The new, larger estimate for next year by Mr Coen would result in a 6.9 per cent gain in domestic ad spending compared with this year's, up from his previous forecast of 6.5 per cent.

This year turned into "a pretty good year despite all the uncertainty," he said, adding that he was "pretty optimistic about 2004 for a number of reasons".

Among them, he listed the comeback in spending for ads on the internet; the potential that the expansion of the American economy is now "sustainable" rather than spluttering along; and increased spending by advertisers in significant categories like cars, cosmetics, drugs and movies.

As in previous forecasts for ad spending in the US, Mr Coen said that he still expected a lag on the local level compared with the national level, primarily because of slower growth in ad revenue for local newspapers - caused by declining demand for help-wanted classified advertising - and television stations, caused by declining demand for commercials from struggling retailers.

Nationally, growth in demand for commercial time on TV would significantly outpace growth in demand for ad space in magazines and newspapers, he added.

Looking at ad spending as a percentage of GDP, Mr Coen estimated a continuing climb from 2.27 per cent in 2002 - the lowest since 1995 - to 2.28 per cent for 2003 and 2.3 per cent for 2004. That is still a far cry from the record of 2.52 per cent in 2000.

Mr Perriss predicted that US ad spending in 2004 would increase 5.1 per cent from 2003. Previously, he had forecast an increase of 5 per cent.

Mr Perriss said that a primary reason for his more upbeat forecast were signs of renewed "corporate confidence," rather than indications that consumers are still willing to spend.